Correlation Between Valhi and First Graphene

Can any of the company-specific risk be diversified away by investing in both Valhi and First Graphene at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Valhi and First Graphene into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Valhi Inc and First Graphene, you can compare the effects of market volatilities on Valhi and First Graphene and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Valhi with a short position of First Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and First Graphene.

Diversification Opportunities for Valhi and First Graphene

-0.13

Correlation Coefficient

Valhi  First Graphene

Good diversification

The 3 months correlation between Valhi and First is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and First Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Graphene and Valhi is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Valhi Inc are associated (or correlated) with First Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Graphene has no effect on the direction of Valhi i.e., Valhi and First Graphene go up and down completely randomly.

Pair Corralation between Valhi and First Graphene

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the First Graphene. But the stock apears to be less risky and, when comparing its historical volatility, Valhi Inc is 3.82 times less risky than First Graphene. The stock trades about -0.14 of its potential returns per unit of risk. The First Graphene is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.20  in First Graphene on December 28, 2024 and sell it today you would earn a total of  1.55  from holding First Graphene or generate 70.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Valhi Inc  vs.  First Graphene

Valhi Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

First Graphene

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Graphene are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, First Graphene reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valhi and First Graphene

The main advantage of trading using opposite Valhi and First Graphene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi position performs unexpectedly, First Graphene can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Graphene will offset losses from the drop in First Graphene's long position.

The idea behind Valhi Inc and First Graphene pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.